Congested highways are a fact of life in most cities. Politicians in Washington agree that if we want to improve our ground transportation system, we need to spend more on infrastructure. They seem to think we can build our way to free flowing urban highways. Much of the debate has centered on how to finance the additional spending. The U.S. Chamber of Commerce and the American Trucking Association support raising the federal gasoline tax. Senators Rob Portman (R-Ohio) and Chuck Schumer (D-N.Y.) have suggested using a portion of corporate tax revenues to fund highway construction.
Raising the federal gasoline tax or using corporate tax revenues will not solve our highway congestion problems.
Given that most highways in the United States are toll free, overuse is to be expected. The only way we can determine whether or not we need to build more highways is to charge drivers who travel during peak hours. These charges or prices reflect the value drivers place on using the highway. These pricing signals can then be used to determine whether it makes economic sense to build more highway capacity. When the value drivers place on using a highway exceeds the cost of additional lanes, more lanes should be built.
Although current federal law prohibits charging tolls on existing interstates, states may apply for permission to charge tolls on new lanes. This has occurred on a limited basis in Southern California. Variable tolls have been used outside the United States to successfully reduce congested highways. Before we spend more on highways, we need to change how we price highways.
Congress could pass legislation that allows states to charge congestion tolls on all interstate highways, and these revenues could be used to reduce fuel taxes, lowering the burden this new tax would impose on drivers. Or the revenues could be used for highway maintenance and construction. Most importantly, by pricing roads correctly, we may actually find that we don’t need to spend more on highways.
Most urban highways experience significant congestion at peak driving times. Highway expansion has been shown to increase the volume of traffic, but that has failed to solve the congestion problem. This is referred to as the “fundamental law of highway congestion.”
Economists Gilles Duranton and Matthew Turner have shown that building more highway capacity in U.S. cities results in residents driving more, greater commercial traffic, and population in-migration. Congestion remains, resulting in wasted time. A recent estimate from the Texas A&M Transportation Institute shows that these delays cost drivers $121 billion per year. Congestion also increases air pollution in neighborhoods near the congested highways.
Some transportation experts promote mass transit to deal with urban transportation problems, but Duranton and Turner don’t find evidence to support these claims. In addition, mass transit systems are costly to build. Variable tolling represents a simple and cost-effective way to solve both congestion and highway financing problems. Tolls would be highest during peak driving hours and lower (or even zero) during off-peak hours. This creates an incentive to shift less essential trips to off-peak hours. It’s a flexible approach to the problem that enables individuals to choose the best travel time and still have less congestion on the highways.
Congestion tolls (taxes) are different from most other taxes. Income and corporate taxes distort decision making, resulting in a less efficient use of economic resources. In other words, they lower our incomes over time. In contrast, congestion tolls actually increase the efficiency of transportation resource use, raising income. While no one likes the idea of new taxes, congestion tolls make us better off. The benefits would be even greater, were we to lower the fuel tax to offset the new tolls paid by drivers.
Transportation studies show that we only need to get a small percentage of drivers off the road to significantly reduce congestion. For example, many peak-hour drivers are not driving to work and would have an incentive to change their driving habits with tolls. In cities that already have mass transit systems, tolls make it worthwhile for some drivers to shift from highway to mass transit. There would also be a greater incentive to car pool. Current policies fail to promote these options.
A reform such as this requires political leadership and a break from the past. Our legislators will have to give up their addiction to pork barrel spending on questionable infrastructure projects. That’s a lot to ask. Once a variable congestion toll system is in place, highway bottlenecks would be greatly reduced, and the highway transportation system would operate far more efficiently. Only then would we be in a position to determine whether or not we need to spend more on highways. Currently, politicians are flying without any infrastructure radar.
Robert Krol is a professor of economics at California State University, Northridge, and the author of new research just published by the Mercatus Center at George Mason University on “Political Incentives and Transportation Funding.”